Things are definitely looking better than a mere couple of weeks ago for stock investors and the people who are willing to predict a recession in 2019, are starting to shrink in numbers. According to both China and the U.S., progress is being made in the trade war after another round of talks wrapped up. The S&P 500 is now up 5 consecutive sessions and 9 of the last 11 since the Christmas Eve selloff. Same for the Dow and the NASDAQ is up 8 of the last 11 including the last 5 consecutive sessions. Gold has stopped rallying and is down 3 of the last 6 sessions and 10-year note yields have jump almost 18 basis points from 2.554% to 2.731%. Copper, however, has barely budged and copper is the real barometer of how China feels about itself and its ever-weakening economy.

Copper and China

China consumes about 40% of the world’s copper. While copper consumption in developed countries has remained stagnant or even fallen recently, the appetite for copper in developing countries like China and India continues to rise and contribute to an overall rise in world copper consumption. Considering that the huge populations of these two countries have not fully urbanized, it is fair to assume this long-term trend of greater global consumption of copper, won’t reverse any time soon. In the short-term, however, just as stocks in the U.S. start to act like everything is going to be alright, copper had one large up move on January 4th and has gone sideways ever since, finishing Thursday’s session only .02 higher than the Jan 4th close. Copper must rally in order for the momentum shift in socks to be crystallized. Either copper will rally or stocks will fall again. The confirmation of the positive rhetoric out of the U.S. and China will be seen in base metals.